Segmentation, Targeting, Positioning & Differentiation –

Cornerstones of Marketing Management

Submitted by : Ankush Puri

Amit Kumar

Steps in Market Segmentation, Targeting, and Positioning

1. Identifysegmentationvariables andsegment themarket

2. Develop profiles ofresultingsegments

MarketSegmentation

3. Evaluateattractivenessof eachsegment

4. Select thetargetsegment(s)

MarketTargeting

5. Identifypossible

positioningconcepts foreach target

segment

6. Select,develop, andcommunicate

the chosenpositioning

concept

MarketPositioning

Step 1. Market SegmentationLevels of Market Segmentation

Mass MarketingSame product to all consumers

(no segmentation)

Mass MarketingSame product to all consumers

(no segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

MicromarketingProducts to suit the tastes of individuals and locations

(complete segmentation)

MicromarketingProducts to suit the tastes of individuals and locations

(complete segmentation)

Niche MarketingDifferent products to subgroups within segments

(more segmentation)

Niche MarketingDifferent products to subgroups within segments

(more segmentation)

Local Marketing

Tailoring brands/ promotions to local customer groups

Individual Marketing

Tailoring products/ programs to individual customers

Steps in the Market Segmentation Process

• Determine Market Boundaries

• Decide Which Segmentation Variables to Use

• Collect and Analyze Segmentation Data• Develop a Profile of Each Segment

• Target Segments to be Served

• Design a Marketing Plan

Bases for Segmenting Consumer Markets

Occasions, Benefits, Uses, or Attitudes

Behavioral

GeographicRegion, City or MetroSize, Density, Climate Demographic

Age, Gender, Family size and Fife cycle, Race, Occupation, or Income ...

Lifestyle or PersonalityPsychographic

Step 1. Market SegmentationBases for Segmenting Business Markets

Basesfor Segmenting

BusinessMarkets

Basesfor Segmenting

BusinessMarkets

DemographicsPersonalCharacteristics

SituationalFactors

OperatingCharacteristics

PurchasingApproaches

STEPS IN SEGMENTATION PROCESS

• NEED BASED SEGMENTATION• SEGMENT IDENTIFICATION• SEGMENT ATTRACTIVENESS• SEGMENT PROFITABILITY• SEGMENT POSITIONING• SEGMENT “ACID TEST” ( SEGMENT STORY

BOARDS TO TEST ATTRACTIVENESS OF EACH SEGMENTS POSITIONING STRATEGY)

• MARKETING MIX STRATEGY

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

• Segments must be large or profitable enough to serve.

• Segments can be effectively reached and served.

ActionableActionable

• Size, purchasing power, profiles of segments can be measured.

• Segments must respond differently to

different marketing mix elements & actions.

• Must be able to attract and serve

the segments.

Effective Segmentation

Descriptive Bases

• Age

• Gender• Income• Occupation• Education

• Family Size or Family Life Cycle

• Religion or Nationality

Geographic Bases

• Region

• Density

• Climate

• Population

Behavioral Bases

• User Status & Brand Loyalty

• Personality/Lifestyle• Social Class

• Occasion• Readiness to Buy• Benefits Sought• Usage Rate

Single Versus Multiple Variable Segmentation

MULTI ATTRIBUTE SEGMENTATION (GEO

CLUSTERING) PRIZM CLUSTERS

PRIZM

• SOME APPROACHES COMBINE GEOGRAPHIC DATA WITH DEMOGRAPHIC DATA TO YIELD EVEN RICHER DESCRIPTIONS OF CONSUMERS AND NEIGHBORHOODS.CLARITAS, INC., HAS DEVELOPED A GEOCLUSTERING APPROACH CALLED PRIZM CLUSTERS

Step 2. Market TargetingEvaluating Market Segments

Segment Size and GrowthAnalyze sales, growth rates and expected profitability for various segments.

Segment Structural Attractiveness Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.

Company Objectives and ResourcesCompany skills & resources relative to the segment(s).Look for Competitive Advantages.

Five Patterns of Target Market Selection

Single-segmentconcentration

Productspecialization

M1 M2 M3 P1

P2

P3

Selectivespecialization

M1 M2 M3 P1

P2

P3

M1 M2 M3

Full marketcoverage

P1

P2

P3

Marketspecialization

M1 M2 M3 P1

P2

P3

P1

P2

P3

M1 M2 M3

P = ProductM = Market

Step 2. Market TargetingMarket Coverage Strategies

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing Mix 1

CompanyMarketing Mix 1

CompanyMarketing Mix 2

CompanyMarketing Mix 2

CompanyMarketing Mix 3

CompanyMarketing Mix 3

MarketMarket

A. Undifferentiated Marketing

B. Differentiated Marketing

C. Concentrated Marketing

Step 2. Market TargetingChoosing a Market-Coverage

StrategyCompany Resources

ProductVariability

Product’s Life-Cycle Stage

Market Variability

Competitors’Marketing Strategies

Positioning is the act of designing the company’s offering and

image to occupy a distinctive

place in the the target market’s

mind.

TWO VIEWS OF POSITIONING

• “POSITIONING STARTS WITH A PRODUCT. A PIECE OF MERCHANDISE, A SERVICE, A COMPANY, AN INSTITUATION OR EVEN A PERSON- BUT POSITIONING IS NOT WHAT YOU DO TO A PRODUCT. IT IS WHAT YOU DO TO THE MIND OF THE PROSPECT. THAT IS, YOU POSITION THE PRODUCT IN THE MIND OF THE PROSPECT” (AL RIES &JACK TROUT)

POSITIONING FRAME WORK

• VALUE DISCIPLINES WITHIN AN INDUSTRY A FIRM COULD ASPIRE TO BE THE

1. PRODUCT LEADER2. THE OPERATIONALLY EXCELLENT FIRM3. THE CUSTOMER INTIMATE FIRM TO

SUCCEED A BUSINESS SHOULD BECOME BEST AT ONE OF THE ABOVE, PERFORM ADEQUATELY IN THE OTHER TWO DESCRIPTION. CONTINUE IMPROVING TO FEND OFF RIVALS

Positioning Strategies

• Product Attributes

• Benefits, Problem Solutions & Basic Needs• Price & Quality

• Specific Use

• Against Other Products

• Product User• Against a Competitor

Positioning StrategyBases Used Example

Brand Name Antiquity Whisky, Monte Carlo Sweaters. orchids Cosmetics

Consumer aspiration Esteem,Cielo Cars, Raymond's Suiting

Brand Personality Escorts Yamaha Bikes,Raymondes Suiting

Selective Consumer Reach Mercedes

Décor of distribution market Arrow shirts, Allen Solly Trousers Tanisq Watches

Event Sponsorship Archers peacks Schnappes Malibu unlike never

Differences WorthDifferences WorthEstablishingEstablishing

AffordableAffordable SuperiorSuperior

ProfitableProfitable

PreemptivePreemptive

DistinctiveDistinctive

ImportantImportant

• Important:-the difference delivers a highly valued benefit to a sufficient number of buyer.

• Distinctive:-the difference is delivered in a distinctive way.

• Superior:-the difference is superior to other ways of obtaining the benefit

• Preemptive:-the difference cannot be easily copied by competitors.

• Affordable:-the buyer can afford to pay for the difference.

• Profitable:- the company will find it profitable to introduce the difference.

DIFFERENTIATION• Process of adding a set of meaningful and valued

differences to distinguish companies offerings from competitors offering. For eg.South west airlines .

Product Differentiation

FormFea-tures

Perfor-mance

QualityConform-

anceQuality

Dura-bility

Relia-bility

Repair-ability

Style Design

PRODUCT DIFFERENTIATION

(1)FORM:-the Size, Shape ,Physical structure

for e.g.. (Aspirin-dosage, size, shape, colour, coating or action time.)

(2) FEATURES :-Supplements its basic function calculate customer value VS. CO. cost for each potential features.

for e.g.. ;-Auto Cos.-several trim levels which lowers manufacturing cost and Inventory costs.

• (3) PERFORMANCE QUALITY :-Level at which primary characteristics operate. E.g. ; -Schlitz driven in it dust when it lowered “Q”.

“Q’ becoming increasingly parameter for differentiation. Catalogues J crow raising prices of merchandise as its raise “Q” highly.

• (4) Conformance quality:- Every Porsche 944 designed to accelerate to 60 mph within 10 second. (C.Q.)

• (5) Durability :-long lasting-people think more for vehicles & kitchen appliances. (p/c’s video cameras must not be exposed to rapid obsolescence )

• Reliability:- means that a product will not malfunction. e.g.. -Maytag. (major home appliances.)

• Style:-100 k & feel e.g.:- car buyers pay high appl. Comp/Mont blanc/H.D.

• To be branded, products must be differentiated .Perdue chicken , Bayer aspirin , tata steel , P&G tide , cheer ,gain candy detergents, Otis making elevators smart.

DeliveryDelivery

Services Differentiation

OrderingEase

OrderingEase

Maintenance& Repair

Maintenance& Repair

CustomerTraining

CustomerTraining

InstallationInstallation CustomerConsulting

CustomerConsulting

Miscellan

eou

sS

ervices

Media Atmosphere

Symbols

Events

Image Differentiation

Image diff.

• Buyers respond differently to company and brand image.eg.Marlboro-(machocowboy)

Personnel diff.

• Company can gain a strong competitive advantage through having better trained people.eg;-Singapore airlines.

Channel diff.

• Company can achieve competitive advantage through the way they design their distribution channel coverage , expertise ,and performance.eg. (caterpillar)

Differentiations VariablesProduct Services Personnel Channel

Form Ordering ease Competence Coverage

Features Delivery courtesy Expertise

Performance Installation Credibility Performance

Conformance Customer Reliability

Durability Training Responsiveness

Reliability C. Consulting Communication

Reparability Maintenance Repair

Style Miscellaneous

Design

Differentiation Strategies

Parameter Example

Product Features Cielo car, IFB washing machine, Sony Trinitron TV

Performance Quality Dove beauty soap,100 pipers whisky.

Exclusivity Style Tanisque watches,Madura coats, Van Heusen,Louies Philippe.

Product Design VIP Elanza suitcases, Bentley ties.

Product range & variety Revlon cosmetics, Ray ban sunglasses.

Service Quality Citibank, Otis elevators, eureka Forbes vacuum cleaners

Packaging Sand piper beer